BSP to banks: Integrate sustainable financing

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is ramping up the promotion of sustainable financing via enabling regulations as well as capacity building and awareness campaigns.

BSP Governor Benjamin Diokno said in his keynote address at the 2019 Finance Philippines forum organized by The Asian Banker the central bank is currently in the process of consolidating and evaluating comments from industry players on the proposed policy framework for sustainable finance.

Under the proposed regulatory framework, Diokno said banks are expected to integrate environmental and social governance and sustainability principles in their strategic direction, as well as in their corporate governance and risk management frameworks.

He said banks would also be required to conduct scenario analysis and stress testing of its business exposures to assess their vulnerabilities over several environmental and social governance scenarios.

According to Diokno, the results of the stress testing should be taken into account in their capital planning and business strategies.

Likewise, the BSP chief said banks would also be required to disclose their sustainability agenda in their annual reports including risk appetites in the environmental and social governance field.

Diokno said the proposed policy framework would be embodied in a circular, as part of a series of circulars on sustainable finance.

Diokno said the regulator continues to take part in several domestic and international fora on sustainability such as the ASEAN Task Force on the roles of central banks in addressing climate and environment-related risks.

“The task force will conduct a study on the roles of central banks in addressing climate and environment-related risk to monetary, financial, and broader macroeconomic stability,” he said.

Likewise, the BSP is also a member of the International Finance Corp. (IFC)-supported sustainable banking network that conducted a scoping research to better understand how to best embed environmental and social risk management as well as sustainable finance principles in the business decisions of financial institutions.

Diokno said the BSP is also coordinating with the British Embassy in Manila on the possible capacity building initiatives under the Low Carbon Energy Program (LCEP) of the UK Prosperity Fund.

He said the regulator and the Department of Finance (DOF) co chairs a newly formed inter-agency task force that is mandated to facilitate green finance initiatives.

According to Diokno, the committee is working on a draft executive order spelling out deliverables and targets in relation to green finance initiatives of the country.

The BSP chief said recent private sector green bond issuances include the $225 million from AC Energy, $225 million by Yuchengco-led Rizal Commercial Banking Corp. as well as 100 million Swiss francs and $300 million by Ayala-led Bank of the Philippine Islands (BPI).